Actions by the U.S. and its European allies yesterday to financially sanction Russia seem even more justifiable today. It now seems clear that a Russian surface to air missile shot down a commercial airllner over Ukraine. But Western European reaction is muted despite intercepted radio communication wherein separatists and Russian admit that they "F'd up" in the use of the weapons thinking they had mistakenly targeted a civilian plane.
Yesterday's actions by President Obama had placed additional restrictions on the financing of state-owned companies such as Russian oil giant Rosneft. European leaders having just completed a meeting of foreign and finance ministers also announced that they would restrict new funding from the European Investment Bank and would pressure the European Bank for Reconstruction and Development to do the same.
Beginning with specific individuals, and expanding to specific companies, sanctions are now seeking to target entire sectors of the Russian economy.
World stock market's immediate reaction was well justified. These sanctions will reduce available financing, and supplies and will further destabilize the operating environment of its international ventures. BUT.....all of Europe has strong ties to the economy of Russia especially in the production of fossil fuels. An impaired Russian economy will have spillover effects on major trading partners such as Europe, which will in turn weigh on the global economy.
Another question is how close Russia to setting its own countersanctions on energy supplies to central and western Europe. Such an escalation, which would certainly trigger even tougher sanctions from the West would tip both Russia and Europe into recession, really dragging down the global economy.
Up to now the world markets have discounted the possibility that rational politician will do their utmost to keep this from happening. They've tended to focus on other factors supporting stability including central bank policies, merger-and-acquisition activity and the gradual healing of Western economies. But events like the one today, where a single incident, the shooting down of a plane by Ukrainian separtists with a Russian Weapon (certainly supplied by the Russians), could introduce a level of brinkmanship which has been largely avoided by the major powers until now.
Events like today, and in this I include Putin's excuses in response to the incident and his placing of responsibility on the Ukraine's "choosing" to continue hostilities, demonstrate that it is not beyond the realm of possibility that politicians will take the conflict over Ukraine to the tipping point.